EUR/USD is settling down in a low range, after making a convincing break of support. The deal that was announced in Cyprus left many uncertainties, and an ill timed comment by the head of the Eurogroup also put a lot of pressure on the common currency. Banks in Cyprus remain closed as officials try to sort out the details of the bank haircut. The focus will shift to the US for some time, as a wide range of indicators is expected to give an updated picture of the US economy.
Here is a quick update on the technical situation, indicators, and market sentiment that moves euro/dollar.
- Asian session: Euro/dollar made an attempt to break above the 1.2880 line, but had no luck.
- Current range: 1.2805 to 1.2880.
- Below: 1.2805, 1.2746, 1.27, 1.2660 and 1.2587.
- Above: 1.2880, 1.2960, 1.3000, 1.3100, 1.3130 and 1.3170.
- 1.2880 turned into resistance after holding very well as support for quite some time.
- The new 2013 low of 1.2828 doesn’t provide meaningful support. 1.2805 is the key: it was the bottom border of a long term range.
Euro/dollar under pressure as the Cypriot crisis continues– click on the graph to enlarge.
- 12:30 US durable goods orders, exp. +3.9%, core orders exp. +0.7%.
- 13:00 US S&P/CS Composite-20 HPI, exp. +7.9% (year over year).
- 14:00 US New Home Sales, exp. 426K
- 14:00 US CB Consumer Confidence, exp. 67.9 points.
- 14:00 US Richmond Manufacturing Index, exp. 8 points.
For more events and lines, see the Euro to dollar forecast
- Cyprus crisis far from over: After a deal regarding Cyprus was announced in the early hours of Monday, the lack of details and implications disappointed markets once again. In fear of a bank run, all the banks will remain closed until Thursday instead of today. Capital controls will be put in place. Cypriots cannot withdraw more than 100 euros from cash machines in some banks. The size of the haircut imposed on big accounts is still unknown.
- Ill-timed comments: The head of the Eurogroup, Dutch finance minister Jeroen Dijsselbloem, practically explained to Reuters and the Financial Times that the Cypriot model could be copied. He later backtracked on these comments, but the damage is already done: holders of large accounts in the euro-zone might feel less comfortable now. This also contributed to a weaker euro.
- Weak economies: The latest PMIs were weak in France and Germany.. These weak numbers point to continued stagnation in the Eurozone, but what is especially worrying is the German data, which points to trouble in the Eurozone’s largest economy. The confidence that Germany’s dip in Q4 was a one-off has been hit. Business confidence indicators remained mixed in the zone’s locomotive.
- US QE here to stay: Ben Bernanke and his colleagues made no policy changes: The benchmark interest rate remains at 0%-0.25%, and the Fed will continue to purchase $85 billion in assets each month. The FOMC did acknowledge the improvement in the economy, but Bernanke also said that too many people are just not counted as unemployed, and that the situation is far from satisfactory.
- US posts solid numbers: Contrary to Bernanke, the economy continues showing signs of accelerated improvement: jobless claims were up slightly to 336 thousand, but beat the estimate of 343 thousand. This marked the fourth straight week that the key employment indicator has been below expectations, sitting at 5 year lows. There was good news as well from the manufacturing sector, as the Philly Fed Manufacturing Index climbed to 2.0 points, beating the estimate of -1.6 points. Existing Home Sales were solid. Today’s new home sales will be interesting to watch.